The latest weak growth figures send a strong warning about the economy, says North West University School of Business and Governance Economist, Professor Raymond Parsons.
“While a weak growth performance was anticipated for 2016 as a whole, the shrinkage in the SA economy in 4Q 2016 was worse than many analysts in both the public and private sectors were expecting. The 2016 growth rate as a whole is the slowest since the 2008 recession.
“The latest growth figures also put a question mark over the growth forecasts for 2017 and 2018 in the recent 2017/18 Budget and upon which tax revenue estimates are based. However, thanks to both more positive global and domestic factors the economy has entered 2017 with more ‘green shoots’ visible in economic prospects.”
Prof Parsons says it is clear, however, that the economic outlook remains vulnerable and challenging.
“Unemployment in particular recorded its highest level since 2003 in 3Q 2016, but improved marginally in 4Q 2016. SA urgently needs job-rich economic growth which will reduce unemployment and alleviate poverty. The economy requires to be turned around soon to avoid a low growth trap.”
He adds that the modest prospects for higher inclusive growth this year therefore need to be nurtured and underpinned by sound measures and effective implementation which reduce, and not increase, policy uncertainty.
“Policy uncertainty has a corrosive impact on investor confidence. Improved growth prospects are also essential for safeguarding SA’s investment grading. Economic growth is not a panacea but an expanding economy makes other goals easier to achieve and softens conflict among them”.